Oct 23

You've probably seen ads for different factoring companies in truck stops, trucking publications, and billboards up and down the interstates, but what do you really know about factoring?

Factoring, especially for the freight hauling industry, is actually a pretty simple idea. Basically, factoring companies pay you money for your freight bills, minus a small percentage for their services. It works because you get money a lot quicker than you would waiting for an invoice to get paid. Factoring enables you to focus on finding and delivering loads – while the factoring company worries about collecting the bills.

But with all the different factoring companies out there, you may be overwhelmed with options. Over the next three weeks, I'll offer you 10 tips that will help you make your factoring choice a little easier…and smarter!

Here are the first three tips that will help you pick the factoring company that best fits your trucking business' needs:

How Quickly Will I Get Funding? – Some factoring companies will pay you within hours of receiving your invoices/bills. Some wait until the next business day. Yet others will only pay after verifying with the customer that the bills are valid, which could take several days to complete. Speed of funding is key to managing your cash flow, so fully understand the funding policy of a factoring company before you sign up.

People and Service
– When you call a factoring company are you speaking to a live person? Do you go straight to voicemail? Do you get a recording? Because truckers work on the road and don’t have time to leave a message and wait for a return call, make sure you will be able to reach someone on the phone when you need too when you are picking a factoring company. Also, confirm the people you are working with are knowledgeable about trucking. You should choose a factoring company that understands your specific needs and can react quickly to answer questions and resolve problems as they arise.

Recourse vs. Non-Recourse – This is very important. Recourse means the factoring company is not taking the credit risk, so if the broker goes out of business or can't pay for the invoice, the factoring company will charge the invoice back to the trucker. Non-Recourse means the factoring company takes the credit risk. If the broker goes out of business or cannot pay for the invoice, a Non-Recourse factoring company takes the credit loss, not you. Non-Recourse factoring companies typically charge more for their services because they are taking the credit risk.

David Fortner has been in the factoring industry for 20 years. He is currently the executive vice president of operations for FreightCheck based in Norcross, Georgia. Prior to FreightCheck, Fortner was vice president of sales for Bibby International Trade Finance.

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